|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
BREAKING: Partners makes another move into the insurance business
Just this afternoon Partners HealthCare announced it is in discussions to acquire Harvard Pilgrim Health, a 1.2M member health plan based in the Boston area. This is not Partners’ first health plan acquisition (the system acquired Medicaid plan Neighborhood Health in 2012), but is a much larger move into the insurance business. Facing ongoing competition from lower-cost Steward Health Care and the new threat of Optum’s acquisition of Reliant Medical Group, adding the plan is another step toward enabling Partners to decant lower-acuity volume toward its community hospitals and away from the high-cost academic core. We’ll have more to say on the Partners-Harvard Pilgrim deal as details become available.
The Texas supreme court rules in favor of transparency
In a case that could have broad implications for how insurers negotiate rates, the Texas Supreme Court handed a victory to patients seeking transparency into contracted rates to allow them to better negotiate with providers. The case concerns an $11,000 bill issued to the plaintiff, Crystal Roberts, for a three-hour ED visit to North Cypress Medical Center after a June 2015 car accident. Under Texas law, hospitals may charge uninsured patients a “reasonable and regular rate”. Roberts and her lawyer argued that the bill, which was based on the full chargemaster rate, was well in excess of the price that would have been paid by any insurer for the same services. The court’s ruling reaffirmed that Roberts should have access to negotiated rates as a benchmark, stating that “a hospital’s reimbursements from private insurers and public payers comprise the vast majority of its payments for services rendered. We fail to see how the amounts a hospital accepts as payment from most of its patients are wholly irrelevant to the reasonableness of its charges to other patients for the same services.”
Commentary on the case has centered on its impact on free market forces in healthcare. Many see the ruling as a victory for consumers, moving one step further toward meaningful price transparency to empower decision-making. A second camp views the case as a blow to insurers’ negotiating power and their ability, as private companies, to set prices on behalf of consumers. As it moves forward, expect this case to be a harbinger of the direction of free market forces in healthcare: are consumers’ interests best served by price transparency and individual choice, or by the protection of middlemen like insurers and pharmacy benefits managers who purport to negotiate on their behalf?
A disruptor returns to the fray, taking a different tack
We were surprised to read this week that Zoom+Care, the Portland area urgent care startup, announced a new joint venture with the Aetna to launch an ACO-like product in Oregon. The new product will be offered in the group market in three Oregon counties. The new joint venture is one of a string of partnerships that Aetna has formed with providers across the country to create lower-cost insurance offerings built around a narrow network of risk-bearing doctors and hospitals.
Zoom+Care’s quick return to the risk marketplace after a troubled experience across the past year is surprising. Once hailed as a disruptor in the Pacific Northwest, with its “Genius Bar”-styled clinics, technology-forward consumer access approach and bespoke specialist network, Zoom+Care drew the attention of industry observers nationally (including us) as a harbinger of a new wave of innovation in the primary care space. But as the company grew, things began to go wrong—in a big way. Its entry into the insurance business was marred by allegations of fraudulent billing, it faced an exodus of employees claiming a terrible work environment, and its largest investor took it to court claiming financial mismanagement. By last year, the company had withdrawn from the insurance business entirely.
The new foray into the risk marketplace with Aetna looks like a much more traditional play than Zoom+Care’s earlier aspirations. The venture is structured as a shared-savings ACO, with Aetna taking on the insurance end and Zoom+Care deploying its clinics, telemedicine platform, and a narrow-network referral relationship with Legacy Health, a large local hospital system. It will be interesting to watch how the partnership performs as Zoom+Care regains its footing and begins to repair its reputation. The story is a cautionary tale about the “move fast and break things” approach of many disruptors in healthcare—in a business so reliant on relationships (with doctors, payers, employees, funders, and on and on), innovators constantly run the risk of foreign-body rejection by an entrenched and well-developed set of incumbents. It’s probably wise to temper disruption with a measure of collaboration, a lesson Zoom+Care now appears to have learned.
A health system doubles-down on postacute, and doubles in size
With all of the attention being paid to cross-sector M&A in healthcare—CVS/Aetna, Walmart/Humana, and so forth—you might have missed one of the more interesting deals we’ve seen this year so far. Toledo-based ProMedica, a $3B+ integrated health system that operates 13 hospitals, surgery centers, clinics and a health plan across Ohio and Michigan, entered into a complex deal to acquire HCR ManorCare, the second-largest nursing home chain in the US. Along with Toledo-based healthcare real estate investment trust Welltower, ProMedica will acquire ManorCare—which had entered into bankruptcy—and operate its 500 skilled nursing facilities (SNF), nursing homes, home health, and hospice operations across 29 states. By entering into the deal, ProMedica will double in size to $7B in revenue and become the 15th largest not-for-profit health system in the US.
The deal comes on the heels of the insurer Humana’s recent moves into the postacute space. ProMedica has its own Medicare Advantage plan, and acquiring ManorCare sets the system up to be able to mirror Humana’s apparent strategy of managing the cost of senior care by deploying subacute and home-based care approaches in the context of private Medicare coverage.
We’ve worked with many health systems who are actively pursuing partnerships and innovation on the “front end” of the delivery system—retail clinics, urgent care centers, and the like. That space has also gotten a lot of attention from disruptors, who look to bring new care models and technology to the primary care market. Vertical integration has been slower to come to postacute care, which has suffered from a (deserved) reputation of being fragmented, chaotic and underfunded. ProMedica’s acquisition is a big moment for postacute care, and it’s worth watching closely how successful the system will be in integrating the assets it’s acquired and pulling them together into a comprehensive, high-performing senior care platform. Questions abound, but it’s good to see this critically-important part of our delivery system getting significant investment and “disruption.”